UMW: Capital spending of RM756 million in FY17

SHAH ALAM: UMW Holdings Bhd, which may take longer to dispose of all its unlisted oil and gas assets, has allocated RM756 million for capital expenditure in the financial year ending Dec 31, 2017 (FY17) for its three core businesses.

Of the RM756 million, RM373 million is for the automotive division, RM271 million for the equipment division, RM69 million for the manufacturing and engineering division and the remaining RM43 million for others.

“I think the outlook for this year will still be challenging. I’m hoping for it to be a better year than 2016. The de-merger will crystalise in late July this year so for the first two quarters of the year we still have to carry the earnings or losses from the oil and gas segment. But the second half promises a better half for us,” president and group CEO Badrul Feisal Abdul Rahim (pix) told reporters after its AGM yesterday.

He said the demerger will reduce its gearing to about 0.54 times. Recall that the group is exiting the oil and gas business with the demerger of UMW Oil & Gas Corp Bhd (UMW-OG) and disposal of its unlisted oil and gas assets.

Badrul Feisal said it has sold 10 assets since 2014, with 16 more for sale. He said the group will try to dispose as many as possible this year despite the “very tight” timeline, which will likely extend beyond 2017.

“We are talking to potential buyers. Hopefully we will be able to strike a few in the next one or two months,” he said, adding that the challenge is finding buyers who are willing to offer the right price.

For the automotive division, the group maintained its sales target of 70,000 units of Toyota models and 202,000 units of Perodua models this year. UMW Toyota Motor Sdn Bhd sold 65,110 units while Perusahaan Otomobile Kedua Sdn Bhd sold 207,110 units last year.

Badrul Feisal said the new plant in Bukit Raja, which is being built by UMW Toyota, will boost its competitiveness as it will be able to introduce new completely knocked down models and offer more variety at competitive prices upon completion of the plant in 2019.

The new plant will have an initial capacity of 50,000 a year and up to 100,000 a year at full capacity. The current plant has a capacity of 75,000 per year. It will be introducing four new Toyota facelifts in the second half of this year.

For the equipment division, the group is pushing its after sales service in Myanmar, following the restrictions on the importation of heavy equipment in the mining sector there.

“We are servicing the current clients that we have today and selling more parts to them. Of course this wouldn’t be able to supplant the loss in terms of the revenue but it would be able to at least not erode significantly,” said Badrul Feisal.

“In Malaysia, we are trying to move from heavy equipment to more urbanisation kind of equipment. We are also trying to do more rental rather than just sales, which we believe has a lot of potential moving forward. We believe that business model is quite good in Malaysia,” he said.

The group, which is the only Tier-1 aerospace supplier of fan-cases for Trent 1000 engines to Rolls Royce in Malaysia, has completed the pre-production and main production facilities within a record time of 16 months. The production of the first fan-case will be out by year-end.

“This year, there will not be significant volume. It will be a single digit volume because it is going to be fully operational starting from October. Next year will be double digit and we expect to breakeven or make a small profit by 2019. We expect full production by 2021,” said Badrul Feisal.